I recently gave a talk at the Libertarian Alliance entitled ‘Spirit Level Egalitarianism, Happiness Economics and Steady State Economics’. When asked where the Spirit Level debate was likely to be going, I reckoned that the message most people would take home from it would be something like: ‘The Spirit Levellers may be overstating their case a bit, but surely there must be something to this.’
As it happens, this is exactly the line taken by Jeremy Warner in the Daily Telegraph. Warner reviews a new OECD report which shows that since the 1980s income inequality has increased in most developed countries. He then goes on to link these findings to his take on the Spirit Level:
‘Personally, I find this [the Spirit Level’s message] far too simplistic [...] The causal link implied by the writers between inequality and human affliction is at best arguable. But there is no quarrelling with their central thesis.’
It is, of course, always easiest to say that the truth most be ‘somewhere in the middle’. But one needs to look at why it is that the hyper-egalitarian position fails to hold as soon as the choice of countries or indicators is slightly altered. The research on the determinants of Subjective Well-Being (SWB) is insightful in this context. It shows that people do indeed compare themselves to others, and evaluate their living standards vis-à-vis one or several benchmark groups. However, these imputed benchmark groups seem to consist of people with fairly similar socioeconomic characteristics. In other words, the man on the Clapham omnibus compares himself to his neighbours, colleagues, former schoolmates and/or others in the same line of occupation. His benchmark group is not the nation as a whole.
So we may be talking about two completely different cups of tea. The drivers of inequality which the OECD report identifies – such as skill-biased technological growth and skill-biased changes in trading patterns – suggest that what has increased are differences between different population subgroups, rather than within-group differences. This may bother Spirit Levellers and OECD statisticians, but presumably it does not bother the man on the Clapham omnibus a great deal.
Warner does not approve of the OECD’s recommendation to reduce inequality primarily through the tax and benefit system. Instead, he recommends improving education and training. Since nobody is in favour of worsening education and training, this seems to make the article uncontroversial in the end. But it is an attempt to have one’s cake and eat it. Skill-biased technological growth means that nowadays a given skill differentialtranslates into a greater income differential than it would have a generation earlier. Raising levels of education and training across the board, though of course desirable, will not necessarily decrease differences in attainment. It could conceivably even magnify them. Either way, no educational reform can turn the UK or the USA into an English-speaking version of Sweden.
Thus, the old question of whether we are willing to constrain the successful for the sake of achieving greater material equality cannot be removed from the agenda so smoothly. The Spirit Levellers, at least, have a clear position on this. Does Jeremy Warner have one too?